PRISON LABOR IN THE UNITED STATES: AN INVESTOR PERSPECTIVE
Julie Goodridge Mari Schwartzer Christine Jantz NORTHSTAR Leslie Christian
April 2018 ASSET MANAGEMENT Rev. May 2018
Copyright © 2018 by NorthStar Asset Management, Inc.
All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission of the publisher, except in the case of brief quotations embodied in critical reviews and certain other noncommercial uses permitted by copyright law. For permission requests, write to NorthStar at the address below.
NorthStar Asset Management, Inc. P.O. Box 301840 Boston, MA 02130 www.northstarasset.com
DISCLAIMER: Information, data, and references included in this paper were compiled by staff at NorthStar Asset Management between October 2015 and March 2018. As we continue to research this issue further, we will revise and update this paper. Please refer to www.northstarasset.com/creating-change to view the most recent version of this paper.
Again we have deluded ourselves into believing the myth that capitalism grew and prospered out of the Protestant ethic of hard work and sacrifice. The fact is that capitalism was built on the exploitation and suffering of black slaves and continues to thrive on the exploitation of the poor – both black and white, both here and abroad.
Martin Luther King, Jr.
From Dr. King’s address, “The Three Evils of Society,” delivered at the First Annual National Conference on New Politics August 31, 1967
Table of Contents
Executive Summary ...... 5 Introduction ...... 6 Finding Prison Labor in the Supply Chain...... 8 Prison Labor as an Investor Concern ...... 9 Keep the “Good Ones” In ...... 12 Corruption and Institutional Racism in Prison Industries ...... 14 Overview on the Structure of Prison Labor in the United States ...... 17 Prison Labor Categorized: ...... 18 Payroll Deductions: ...... 19 Detailed Discussion of Prison Industries ...... 20 Prison Labor in For-Profit Prisons ...... 20 Prison Industry Enhancement Certification Program (PIECP) ...... 21 Concerns about PIECP ...... 21 Issues with Oversight and Organization ...... 22 Federal and State Prisons Outside PIECP ...... 24 State Prisons: ...... 24 Federal Prisons: ...... 25 Examples of Inmate-Made Products ...... 27 PIECP Products and Private Enterprise Partners...... 27 Generic Products in the State Prison Industries ...... 29 Agriculture and Recent Political Changes ...... 30 Recommendations for Corporations that Use Suppliers: Policy & Auditing ...... 32 Preferred Practices: ...... 32 For non-PIECP programs (federal and state): ...... 32 For PIECP: ...... 33 Conclusion: Moving Forward ...... 35 Appendix A: Shareholder Proposal Example (Costco 2018) ...... 37 Appendix B: Glossary of Terms ...... 38
Executive Summary
Prison labor is enabled in the United States by the 13th amendment of the U.S. Constitution which prohibits slavery “except as a punishment for crime.” Over 2.2 million individuals are incarcerated in state, federal, and private prisons in the United States, and nearly all able-bodied inmates work in some fashion. While many inmates are employed in maintenance of the prison, a significant number of inmates work to produce goods or perform services for private companies, nonprofit organizations, and state or federal agencies that partner with prisons.
Prison labor in the U.S. started with convict leasing during slavery and has ballooned into a billion dollar industry that is rooted in the racially-skewed nature of excessive incarceration. The abundance and use of prison labor, rather than being challenged by legislators, has been monetized through the sale of cheap labor to companies and state-funded entities, thereby supporting the expense of expanded incarceration and providing a hidden slave labor force.
While a small percentage of prison labor lies within one specific federally-regulated program, the vast majority exists in state, federal, and private prisons that have no centralized regulatory body. Prison labor is pervasive in the United States penal system, but the extent to which that labor is used to supply American corporations with goods and services is shrouded in secrecy.
As a duty to our clients to better understand supply chain risk and to illuminate practices that we consider inhumane, we have undertaken a long-term research project to map prison labor in the supply chains of our portfolio companies and to provide practical steps that shareholders and companies can take in order to pursue solutions.
We specifically urge companies to develop and adopt a company Prison Labor Policy to guide companies in formulating a standard process for identifying incidences of prison labor and, when discovered, addressing them with a transparent plan (details follow in this paper).
We urge investors to engage the corporations in their portfolios to seek a complete survey of the company supply chain for prison labor (we offer an engagement template later in this paper).
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Introduction
As a wealth manager focused on the social responsibility of our clients’ portfolios, NorthStar Asset Management, Inc. engages with investee companies as part of our fiduciary duty to our clients. We seek to improve the positions and policies of the companies in our clients’ portfolios regarding various issues that affect those companies as well as our society’s long-term viability. Our stance is that corporate policies, decisions, and actions that prioritize short-term financial returns to shareholders can undercut fair and equitable treatment of a company’s employees, suppliers, and customers. Those policies can compromise a company’s long-term planning, research, and development and can harm the health of our planet and people. In today’s global economy, it is increasingly important to take a full-cycle perspective that includes all aspects of a company’s supply and distribution chains. For the purposes of our research and analysis, we consider companies responsible for their entire network of employees, contractors, and suppliers.
Over 2.2 million individuals are incarcerated in state, federal, and private prisons in the United States, and nearly all able-bodied inmates work in some fashion. While many inmates are employed in maintenance of the prison, a significant number of inmates work to produce goods or perform services for private companies, nonprofit agencies, and state or federal agencies that partner with prisons. Prison labor is enabled in the United States by the 13th amendment of the U.S. Constitution which prohibits slavery “except as a punishment for crime,” and, while prison labor began with convict leasing during slavery, it has ballooned into a billion dollar industry.1
Minimal regulation exists around prison labor, leaving the treatment of prisoners to the discretion of the customer (such as a private company, nonprofit agency, or state or federal agency) and/or the prison, both of which reap financial benefit from the arrangement. As we detail in a later section, we view correctional industries as part of a rigged system. Incarceration rates for black men are substantially higher than for whites due to our country’s history of racially-skewed criminal justice laws, and those who are incarcerated are employed in work in conditions often described as modern slavery. In today’s economy, prison inmates have replaced slaves as the cheapest available source of labor in the United States. In some states, inmates are required to work but do not get paid; in other states, inmates are paid a nominal hourly wage. Overall, inmates are vastly underpaid and have very few rights related to their employment.
Anecdotal stories describe some potential benefits for inmates working while incarcerated; however, there are also numerous reports of inhumane treatment, including inmates being forced to work against their will. Our role as concerned investment advisors is to educate
1 “Prison labour is a billion-dollar industry, with uncertain returns for inmates.” The Economist. March 16, 2017. www.economist.com/news/united-states/21718897-idaho-prisoners-roast-potatoes-kentucky- they-sell-cattle-prison-labour
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ourselves, fellow investors, and investee companies on the extent of prison labor in the United States and to encourage public companies to understand their responsibility to ensure safe working conditions and reasonable wages for any inmates performing services or creating products in the company’s supply chain.
Prison labor must not be viewed simply as a strategy to reduce overhead costs when it inherently exploits this country’s history of racism, implicitly affirms the racist origins of the United States’ economic system, and increases economic inequality. Companies that buy products and services have an obligation to identify any incidences of prison labor in the company supply chain and engage suppliers to improve inmate treatment. All companies that profit from the labor of inmates that are underpaid, potentially forced into working, or working in inappropriate or inhumane conditions must be held accountable for their supply chain. Inmates’ inability to unionize may enhance short term profit for companies, but these partnerships also support an unjust, unethical partnership with correctional institutions. Without knowledge of where prison labor lies (or verified evidence that there is no prison labor), the company cannot protect itself or shareholders from risk, nor can it intervene on behalf of inmates to improve treatment. If companies are using prison labor either directly or indirectly, they are participants in an exploitative practice that is likely in conflict with many companies’ stated values. For these reasons, company involvement on this issue is crucial.
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Finding Prison Labor in the Supply Chain
Prison labor was not always the opaque, secretive industry it is now. Before the internet burgeoned into a robust route of knowledge distribution, prison industries were promoted nationwide and government agencies actively and openly recruited companies to bring manufacturing onto prison grounds.2 Now, however, it is apparently no longer desirable to publicly acknowledge or highlight the use of prison labor in supply chains. While open to a national supply of vendors, prison industries have been deeply buried within the supply chain, with sub-vendors shrouded in secrecy. Items we are able to identify as made by prisoners are often produced under generic or little-known brand names and are thus very difficult to track from production through the supply chains of the companies in our clients’ portfolios.
Without involvement from the companies sourcing the products, it remains exceedingly difficult to identify incidences of prison labor in the supply chain. There may be supply chain routes that are reasonably simple to track (for example, raw agricultural products harvested from the field by inmates, sold to a distributor, and then sold to various grocery stores), but most situations are more complex. Inmates may harvest potatoes that are sold to a manufacturer that transforms those potatoes into a component such as potato starch which then is incorporated into a prepared food item and then sold to a distributor before finally showing up as an ingredient in a product on store shelves. In another example, inmates make generic electrical wiring that is sold as a component for a high-tech product. In a specific example provided by a prisoner advocate, the parent company of a fast food chain hired a screen-printing supplier to print merchandise with no knowledge that the screen-printing was completed in prisons and made by prisoners’ hands.3
Given that the route from prison to consumer is often through multiple suppliers or assembly contractors, it is not sufficient for a sourcing company to perform cursory reviews of only their top-level suppliers. Due to the pervasive nature of prison labor and the risk to brand name and confidence that comes from association with prison labor (as discussed in the next section), we recommend that all companies undertake an audit throughout the supply chain – working down the chain from supplier to supplier, identifying any and all incidences of prison labor. Beginning on page 32, we offer specific recommendations to companies on how to search for prison labor in the supply chain as well as suggested next steps once prison labor is identified.
2 View an archived video here which advertises opportunities for prison labor: https://www.youtube.com/watch?v=cUJHaELZQrc 3 Sloan, Bob. Personal interview. 17 February 2017.
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Prison Labor as an Investor Concern
Prison labor is undeniably a shareholder issue. Research shows that national concern about the American criminal justice system is vast across “all political parties, regions, age, gender, and racial/ethnic groups.”4 In general, American consumers believe that our criminal justice system needs reform and that too many people are incarcerated. While little data exists about public opinion of prison labor specifically, we did not come across any instances in which the public’s knowledge of prison labor was beneficial to the company. On the contrary, when prison labor is identified as associated with public corporations and private brands, the company suffers.
For example, Victoria’s Secret is still trying to distance its brand name from the 1990s incident in which a supplier used inmate labor to sew garments, causing substantial controversy and embarrassment to the company.5 Despite the fact that the brand’s owner insists6 that no further prison labor has been used to make its products, Victoria’s Secret still remains on numerous websites that report lists of companies that are using prison labor to produce products. At least one website refers to Victoria’s Secret as one of the companies that are “supporting modern American slavery.”7 Decades after the incident, Victoria’s Secret simply cannot succeed at abolishing this scandal from society’s collective memory. More recently, Wal- Mart experienced “community uproar” when it used inmate labor to build a distribution center in Wisconsin in 2005.8 Whole Foods experienced significant backlash for selling goat cheese made from prisoner-produced milk and inmate-farmed tilapia when a protest broke out at one of its stores in Texas in 2015.9
NorthStar Asset Management, Inc. filed the first-ever shareholder proposal on this topic in the fall of 2017. Thus far, we have found that companies have not audited their supply chains for prison labor and may not have given prison labor much consideration at all. Some companies rely upon assumptions that suppliers already have third party audits and that those audits include verifying the absence of prison labor. When pushed on this issue, the staff of at least one company with which we have engaged admitted that while they assume the suppliers use
4 Pew Survey: “Public Opinion on Sentencing and Corrections Policy in America.” Pew Trusts. http://www.pewtrusts.org/~/media/assets/2012/03/30/pew_nationalsurveyresearchpaper_final.pdf 5 Caroline Winter. “What Do Prisoners Make for Victoria’s Secret?” Mother Jones. July/August 2008 Issue. https://www.motherjones.com/politics/2008/07/what-do-prisoners-make-victorias-secret/ 6 “Labor From Correctional Institutions/Prisons” L Brands. Accessed Feb 27, 2018. https://www.lb.com/media/our-responses/labor-from-correctional-institutions-prisons?print=true 7 “50 Companies Supporting Modern American Slavery.” Caged Bird Magazine. March 28, 2017. www.cagedbirdmagazine.com/single-post/2017/03/28/50-Companies-Supporting-Modern-American- Slavery 8 Caroline Winter. “What Do Prisoners Make for Victoria’s Secret?” Mother Jones. July/August 2008 Issue. https://www.motherjones.com/politics/2008/07/what-do-prisoners-make-victorias-secret/ 9 Allison Aubrey. “Whole Foods Says It Will Stop Selling Foods Made With Prison Labor.” NPR. September 30, 2015. https://www.npr.org/sections/thesalt/2015/09/30/444797169/whole-foods-says-it-will-stop- selling-foods-made-by-prisoners
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third party auditors and that those audits seek answers about prison labor, the company staff do not complete due diligence checks to verify that a satisfactory audit report exists. Additionally, companies may have in place a policy that prohibits prison labor in their supply chain, but they then fail to establish and follow a diligence process to verify that suppliers do not buy prisoner- made goods or use prisoner services.
Because prison labor is clandestine in nature, only an active pursuit will uncover any or all incidences within the supply chain. If company management does not know whether prison labor exists in the company’s supply chain, management cannot know if they are exposed to these risks, nor can they properly protect shareholder value. Waiting until public controversy erupts only risks harm to the brand and shareholder value.
In addition to brand risk, litigation risk may rise in the near future for companies connected to prison labor in the supply chain. Because incarcerated workers are not expressly excluded from the definition of “employee” in workers’ protection statutes such as the Fair Labor Standards Act (FLSA), inmates have attempted to sue prison-employers for fair wages. Those lawsuits have failed because “courts have ruled that the relationship between the penitentiary and the inmate worker is not primarily economic,”10 but a growing number of outspoken voices argue that paying inmates a minimum wage and offering other typical employee benefits are beneficial for both the inmate and his or her family as well as for society at large and for the economy.11 In 2016, inmates staged a largescale work strike to protest unfair treatment12 and we expect that inmates and their advocates will continue to gain attention for this issue, as well as continue to seek litigious routes for fairer pay and conditions. Companies benefiting from free or undercompensated labor will surely not be excluded as targets of these attempts.
We encourage all shareholders in publicly traded corporations to engage with their investee companies to urge them to identify instances of prison labor in the entire supply chain. Companies need to regularly audit the supply chain to verify either the lack of prison labor or to identify and improve prison labor programs that are found within the company supply chain. To aid other shareholders, we have included our shareholder proposal example in Appendix A.
We contend that shareholders should be concerned about the potential existence of prison labor in their investee companies’ supply chains due to the risk to the business, if nothing else. A company without full knowledge of its exposure to prison labor cannot defend shareholder value against those potential risks.
10 Whitney Benns. “American Slavery, Reinvented” The Atlantic. September 21, 2015. www.theatlantic.com/business/archive/2015/09/prison-labor-in-america/406177/ 11 As one example, this Bloomberg article explains why paying inmates a minimum wage would benefit the American working class: https://www.bloomberg.com/view/articles/2017-06-02/paying-inmates- minimum-wages-helps-the-working-class 12 Read more about the strike in this CNN article: https://www.cnn.com/2016/10/30/us/us-prisoner- strike/index.html
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Connecting the Dots — Capitalism, Slavery, and Incarceration
If capitalism…is about wage labor, markets, contracts, and the rule of law, and, most important, if it is based on the idea that markets naturally tend toward maximizing human freedom, then how do we understand slavery’s role within it? No other national story raises that question with quite the same urgency as the history of the United States: The quintessential capitalist society of our time, it also looks back on long complicity with slavery…The relationship of slavery and capitalism is, in fact, one of the keys to understanding the origins of the modern world.
Sven Beckert, “Slavery and Capitalism” Chronicle of Higher Education, December 12, 2014
The birth of our nation as an industrialized powerhouse depended on slave labor. Early “for- profit” corporations were formed so that groups of people could “invest” together, essentially creating an economic framework to trade commodities. Human beings (slaves) were considered commodities, and their market value fluctuated as demand for the goods they produced (cotton, tobacco, sugar, etc.) waxed and waned and as the closing of the African slave trade eventually eliminated “supply.” Textile mills, railway systems, and agricultural industries created the oldest stores of wealth in this nation, but this wealth would have been substantially reduced if early cotton, steel, and tobacco workers had earned a wage.
Historian Sven Beckert explains:
For the first half of the 19th century, slavery was at the core of the American economy. The South was an economically dynamic part of the nation for its white citizens. Its products not only established the United States’ position in the global economy but also created markets for agricultural and industrial goods grown and manufactured in New England and the mid-Atlantic states. More than half of the nation’s exports in the first six decades of the 19th century consisted of raw cotton, almost all of it grown by slaves.13
In order to accommodate the growing demand for commodities, entrepreneurs developed a banking system that would grant access to capital for the purchase of slaves. In The Business of Slavery and the Rise of American Capitalism, 1815-1860, author Calvin Schermerhorn describes a method of supplying “credit” to landowners, allowing them to use slaves as collateral for loans to purchase more slaves. Because currency was in short supply in the South, some Louisiana bankers essentially bundled these collateralized loans and sold them to wealthy individuals in New York and Europe who were willing to buy “slave-based securities.”14 The bundling of
13 Beckert, Sven. “Slavery and Capitalism.” December 12, 2014, Chronicle of Higher Education 14 Eric Herschtal. “How Slavery Gave Capitalism Its Start.” The Daily Beast. April 24, 2015. https://www.thedailybeast.com/how-slavery-gave-capitalism-its-start
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“collateralized obligations” is precisely the type of financial manipulation that occurred during the 2008 financial collapse. Unfortunately, banks that participated in these early “collateralized obligations” like Bank of America and JP Morgan Chase ended up surviving both the collapse of slavery and the 2008 financial crisis.15,16
Since economic growth, capitalism, and slavery are so closely linked, one Keep the “Good might ask how capitalism, and indeed the U.S. corporation, survived after Ones” In the Civil War and the end of slavery (i.e. cheap labor). The truth is that slavery did not go away: it morphed into sharecropping which allowed landowners to continue to profit from the labor of their renters; then Jim “We need to keep some out Crow laws that enforced racial segregation; and now mass incarceration there, that’s the ones that you can work, that pick up in the United States. trash, the work release program, but guess what? Indeed, it appears that since slavery was abolished those in power have Those are the ones that sought ways to over-incarcerate and overwork former slaves and their they are releasing. In descendants: addition to the bad ones, Both in response to [the demand for convict labor] and as they are releasing the good ones, that we use every day a way for white society to reassert its power over the to wash cars, change oil in newly emancipated black population, the Southern states our cars, to cook in the began to increase dramatically the sentences exacted kitchen, to do all that where against petty criminals, the vast majority of whom were we save money…well, they former slaves. For example, in 1876, the Mississippi are gonna let them out.” legislature passed a “major crime bill,” known as the “Pig Law,” which redefined the crime of grand larceny to - Steve Prator, Sheriff of Caddo Parish, Louisiana, in include “the theft of a farm animal or any property valued response to the 2017 at ten dollars or more.” Violation of this law, which was Justice Reinvestment Act “aimed directly” at the newly freed slaves, meant up to that would allow release of five years in state prison. Moves like this one “good” non-violent accompanied the legalization of convict leasing and inmates. ensured sufficient convicts to meet the demand.17
15 A Chicago city rule requires that companies disclose historic dealings in slavery in order to do business with the city. As a result of those disclosures, we learned that predecessor companies for major banks such as JP Morgan Chase and Wachovia (acquired in 2008 by Wells Fargo) accepted slaves as loan collateral, and sometimes took ownership of slaves when plantation owners defaulted on loans. Bank of America disclosed that it found at least two slave-related deals. 16 As reported by another source, “Bank of America found that two of its predecessor banks (Boatman Savings Institution and Southern Bank of St. Louis) had ties to slavery and another predecessor (Bank of Metropolis) accepted slaves as collateral on loans.” http://yourblackworld.net/2013/08/29/shocking-list- of-10-companies-that-profited-from-the-slave-trade/ 17 Sharon Dolovich. “State Punishment and Private Prisons.” Duke Law Journal. Dec 2005. Vol 55, No. 3 (437-546)
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Mass incarceration and prison labor are two routes through which the U.S. economic system has continued to push people of color into positions of exploitation. Increased incarceration levels combined with pressure from growing deficits have led states to cut costs and seek revenue opportunities in the criminal justice system. Political pressure on corporations to repatriate capital to the United States may lead companies to seek prison labor as a source of cheap domestic labor. Because companies that repatriate assets are pressured to keep overhead low, paying prisoners a minimal wage allows the company to satisfy political pressures of “hiring locally” while not increasing production costs.
The supply of prison labor today offers companies in the United States access to the slave labor of yesterday. Prison labor has become a profit-driven manufacturing option for many companies: instead of dealing with import fees and costs of long-distance transport in order to hire cheap labor, companies have found a low-cost and convenient source of labor here in the United States.
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Corruption and Institutional Racism in Prison Industries
Investors and companies should be concerned to learn that the American Legislative Exchange Council (ALEC), the “business-backed conservative group” which drafts model bills for congress18 has been “instrumental” in the expansion of prison labor in the United States. ALEC was founded in 1973 by conservative activists to “promote conservative, pro-business legislation at the state level by bringing private companies together with state legislators.”19 As many as 2,000 state lawmakers (one-third of the nation’s total) and more than 200 corporations and special-interest groups are included in ALEC’s membership.20 Perhaps most famous for Florida’s controversial Stand Your Ground statute connected to the killing of Trayvon Martin in 2012 (a law that has been academically confirmed to have racial bias21), ALEC and its members have used political influence to increase the prison population through questionable and even corrupt arrangements that directly benefit companies related to prison industries:
Both the Corrections Corporation of America (CCA) [now CoreCivic] and The GEO Group, the country’s two largest private prison companies, have been longtime members and supporting contributors to ALEC. CCA paid an additional annual membership fee to secure a seat on ALEC’s Public Safety Task Force, a key incubator of the signature law-and-order legislation that fueled the prison boom in the 1980s and 1990s, including mandatory minimums, truth in sentencing, and three-strikes laws.22
These laws, promoted and supported by ALEC, have dramatically increased incarceration rates in the past three decades, leading to the United States’ outsized proportion of incarcerated individuals. The NAACP reports that “the United States makes up about 5% of the world’s population and has 21% of the world’s prisoners.”23 Not only does the U.S. have an extremely high incarceration rate, but the racially-skewed nature of our criminal justice system becomes apparent when we learn that white offenders have been convicted less and given shorter sentences24 and African Americans are incarcerated at more than five times that of whites,25 but
18 Alexander Hertel-Fernandez. “Who Passes Business’s ‘Model Bills’? Policy Capacity and Corporate Influence in U.S. State Politics.” American Political Science Association. 2014. 19 Alexander Hertel-Fernandez. “Who Passes Business’s ‘Model Bills’? Policy Capacity and Corporate Influence in U.S. State Politics.” American Political Science Association. 2014. 20 Beau Hodai. “Corporate Con Game.” In These Times. June 21, 2010. http://inthesetimes.com/article/6084/corporate_con_game/ 21 Nicole Ackermann et al. “Race, law, and health: Examination of ‘Stand Your Ground’ and defendant convictions in Florida.” Social Science & Medicine. Volume 142, October 2015, Pages 194-201, http://www.sciencedirect.com/science/article/pii/S0277953615300642 22 Gottschalk, Marie. Caught, The Prison State and the Lockdown of American Politics. Princeton, New Jersey: Princeton University Press, 2015. (85) 23 “Criminal Justice Fact Sheet.” NAACP, http://www.naacp.org/criminal-justice-fact-sheet/ 24 Rania Khalek. “21st-Century Slaves: How Corporations Exploit Prison Labor.” AlterNet. http://www.alternet.org/story/151732/21st-century_slaves%3A_how_corporations_exploit_prison_labor
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“whites and blacks engage in drug offenses, possession, and sales at roughly comparable rates.”26 Author Michelle Alexander explains in The New Jim Crow that more black men "are in prison or jail, on probation or on parole than were enslaved in 1850," in great part due to the War on Drugs27 (an American government anti-drug movement that features, among other things, mandatory minimum sentencing laws based on ALEC model legislation).
Just as ALEC was involved in model legislation that ramped up incarceration rates, “ALEC has proven expertly capable of devising endless ways to help private corporations benefit from the country’s massive prison population.”28 An exposé by The Nation in 2011 revealed that ALEC laid the groundwork for “states and corporations to replace unionized workers with prison labor.”29 As prison overcrowding increased, ALEC began orchestrating new ways to benefit its members by pushing for the expansion of prison labor industries. In Caught, by Marie Gottschalk, we learn that for at least two decades now, “ALEC has been pushing to expand [a small-scale prison labor program known as] PIECP and to make prison industries more attractive to the private sector, especially the organization’s large corporate benefactors.” In fact, in 1995 ALEC introduced its Prison Industries Act which “was modeled on a controversial bill that the Texas legislature had enacted with the help of state representative Ray Allen, who was active with ALEC and also was a lobbyist for the National Correctional Industries Association (NCIA).”30
As we detail later in the paper, farmers have been encouraged to hire inmates to fill the labor void created by legislative efforts at “immigration reform.” A 2010 investigation by In These Times uncovered the connection between ALEC and SB 1070, Arizona’s so- called Support Our Law Enforcement and Safe Neighborhoods Act which “invite[s] rampant racial profiling against Latinos, Asian-Americans and others presumed to be "foreign" based on how they look or sound,”31 as well as the various “copycat” legislation that followed in other states. When SB 1070 was signed into law, ALEC’s Public Safety and Elections Task Force included the private prison company CCA (now CoreCivic), the American Bail Coalition, and the National Rifle Association. Other model legislation that arose from this task force included the “No Sanctuary Cities for Illegal Immigrants Act,” which along with SB 1070 would lead to higher incarceration rates
25 “Criminal Justice Fact Sheet.” NAACP, www.naacp.org/criminal-justice-fact-sheet/ 26 Rania Khalek. “21st-Century Slaves: How Corporations Exploit Prison Labor.” AlterNet. www.alternet.org/story/151732/21st-century_slaves%3A_how_corporations_exploit_prison_labor 27 Alexander, Michelle. The New Jim Crow: Mass Incarceration in the Age of Colorblindness. New York: New Press, 2010. (179-180) 28 Mike Elk and Bob Sloan. “The Hidden History of ALEC and Prison Labor.” The Nation. Aug 11, 2011. https://www.thenation.com/article/hidden-history-alec-and-prison-labor/ 29 “New Exposé Tracks ALEC-Private Prison Industry Effort to Replace Unionized Workers with Prison Labor.” DemocracyNow! August 5, 2011. www.democracynow.org/2011/8/5/new_expos_tracks_alec_private_prison 30 Gottschalk, Marie. Caught, The Prison State and the Lockdown of American Politics. Princeton, New Jersey: Princeton University Press, 2015. (85) 31 “Arizona’s SB 1070.” ACLU. https://www.aclu.org/issues/immigrants-rights/state-and-local- immigration-laws/arizonas-sb-1070
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(and revenue) for private prison ALEC members GEO Group and CoreCivic as well as increased profits for prison suppliers like Sodexho Marriott (a large food services supplier to private prisons and a member of ALEC).32 An article from Daily KOS explains that “ALEC's efforts of eliminating ‘illegal’ aliens from agribusiness work coincided with their SB 1070 and earlier state legislative efforts. They realized the impact the laws would have upon immigrant workers and that a labor force would be necessary to take the place of immigrants picked up or scared off by laws like SB 1070.”33 See our section Agriculture and Recent Political Changes for more details.
With more companies turning to prison labor in an increasingly tight labor market, lack of worker protections and a dearth of company policies related to prison labor will put even greater stress on an already untenable situation. Though ALEC has had a clear and influential role in expanding prison industry programs across the United States, we see no evidence that the organization considers issues such as inmate welfare or risks posed to companies when designing its model legislation. Given the organization’s history and connection to laws that have increased economic inequality for people of color, we consider the connection between ALEC and prison industries to be of particular concern. Inmate work projects should be focused strictly on prisoner rehabilitation and reducing recidivism, not on profit. We see indications that ALEC has sought to increase incarceration rates in order to provide a larger workforce, but there is no evidence that ALEC has any interest in inmate rehabilitation and reintegration into society. Given these facts, we approach prison labor with a skeptical view that we believe is essential for all concerned investors and companies.
32 Beau Hodai. “Corporate Con Game.” In These Times. June 21, 2010. http://inthesetimes.com/article/6084/corporate_con_game/ 33 Bob Sloan. “INSOURCING - Identifying businesses involved in prison labor or supporting those who are.” DailyKOS. December 14, 2010. https://www.dailykos.com/stories/2010/12/14/928611/-INSOURCING- Identifying-businesses-involved-in-prison-labor-or-supporting-those-who-are
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Overview on the Structure of Prison Labor in the United States
Prison labor in the United States has developed into a profitable and complex system that is remarkably opaque and covert. It involves multiple paths through which corporations can establish production sites, farmland, and processing plants, and even call centers in or near state, federal, or for-profit prison compounds.
The Ashurst–Sumners Act of 1935 made it illegal to knowingly transport convict-made goods for interstate or foreign commerce, with a few exceptions:
The prohibition applies only to originally manufactured goods produced by inmates that cross state lines, entering into interstate commerce. Service operations, such as refurbishing goods that have already entered into interstate commerce, are not prohibited. Goods produced in conjunction with private sector partners which do not cross state lines are subject only to state law which varies from state to state. Agricultural goods are exempt from regulation as are goods produced for a non-profit organization.34
It appears that the term “agricultural goods” is applied in a deliberately broad manner. One definition describes it as “agricultural, horticultural, viticultural, and dairy products, livestock and the products thereof, the products of poultry and bee raising, the edible products of forestry, and any and all products raised or produced on farms and processed or manufactured products thereof, transported or intended to be transported in interstate and/or foreign commerce.”35 While fish farming is not expressly named in this definition, we can assume that fish are included as an “agricultural product” given that at least one correctional industry has been documented as selling farmed fish to a retailer’s supplier.
The Justice System Improvement Act of 1979 allowed for more exceptions to the rule though the creation of the Prison Industry Enhancement Certification Program (“PIECP,” described in detail below). The Ashurst–Sumners restrictions are generally related to avoiding competition with “free-world” enterprises that could not compete with the low cost of prisoner labor, and the Justice System Improvement Act created opportunities for interstate commerce of inmate- made goods under circumstances that are also intended to avoid competition with free-world enterprises. PIECP has certain requirements, including payment of a minimum wage; however, we detail below a variety of concerns about this program.
Taking these restrictions and exceptions together, the situation can be summarized as:
34 Summary Findings of the 2009-2010 PIECP Compliance Site Assessments. National Correctional Industries Association, www.nationalcia.org 35 “7 U.S. Code § 451 - “Agricultural products” defined.” Legal Information Institute. Cornell Law School. https://www.law.cornell.edu/uscode/text/7/451
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• Inmates can be hired to manufacture goods while in prison, and depending on state regulations those goods may be sold to private companies, state agencies, nonprofits, schools, universities and private citizens that are located in the state of manufacture (but some states prohibit sale to certain categories of customers). Legally, these products cannot be resold out of state. • Agricultural products can be produced by inmates and sold across state lines without federal restriction. While some states restrict sales of goods to state-funded agencies, many of those states sell agricultural products on the open market. • Service jobs such as call center services, moving labor, and furniture refurbishment are not restricted by federal legislation but may be restricted by state regulations. • Prisoner-made products are eligible for international sale. 36 • Any item produced through PIECP is eligible for interstate commerce.
Prison Labor Categorized:
We have organized United States prison labor into four broad categories, described below. Greater detail on each type of prison labor continues in further sections of this paper.
1. Privately-run for-profit prisons such as CoreCivic (formerly CCA) and GEO Group, which house at least 126,000 federal and state inmates (as of 2015)37, many of whom work in for-profit company jobs in industries such as carpentry, computer applications, construction and building trades, electrical trades, horticulture and landscaping, masonry, painting, and plumbing. Pay can be as low as $0.16/day38, although a CoreCivic prison in Tennessee can pay as much as $0.50/hour for high skilled positions.39 Some for-profit prisons obtain Immigration and Custom Enforcement (ICE) detainees.
2. Prison Industry Enhancement Certification Program (PIECP): PIECP is a federal government program that allows for the creation of inmate jobs by private sector companies, puts in place certain minimal standards for treatment of inmates, and allows for the interstate commerce of prison-made goods. In general, only 5,000 inmates work on PIECP projects.
36 For an example of these stated restrictions, see: “Eligible Customer.” PRIDE Enterprises. https://www.pride-enterprises.org/content.aspx?page=EligibleCustomer 37 Abigail Geiger. “U.S. private prison population has declined in recent years.” Pew Research Center. http://www.pewresearch.org/fact-tank/2017/04/11/u-s-private-prison-population-has-declined-in- recent-years/. April 11, 2017 38 “Section III: The Prison Economy.” Prison Policy Initiative. www.prisonpolicy.org/prisonindex/prisonlabor.html 39 Vicky Peláez. “The Prison Industry in the United States: Big Business or a New Form of Slavery?” Centre for Research on Globalization. 10 March 2008. http://www.globalresearch.ca/the-prison-industry-in-the- united-states-big-business-or-a-new-form-of-slavery/8289
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3. State Prison Labor (outside of PIECP): With approximately 1,370,000 inmates total40, state prisons provide the lion’s share of inmates for jobs that come from outside companies. Many inmates work internally in prison upkeep jobs such as cooking, cleaning, and laundry; however, thousands of inmates produce goods and agricultural products, participate in animal husbandry, or perform call center services for outside companies.
4. Federal Prison Labor (Outside of PIECP): As of 2017, Federal Prison Industries (which functions under the trade name “UNICOR”) reported 16,891 inmates employed in UNICOR prison industry work, though it claims approximately 18,000 inmates as participants in the program. Non-PIECP inmate workers earn only $0.23 - $1.15 per hour through 83 factories.41 UNICOR inmates manufacture a wide variety of products from apparel, awards, linens, and office furniture to distribution, 3D modeling, and call center services. See more details on page 24.
Payroll Deductions:
In the cases of inmate labor programs we identified, inmate workers keep only a small percentage of their wages (most often 20%, which is sent to their prison commissary account, and sometimes 20% more that is placed in a long-term savings account) with the greater portion going to recipients such as the prison system for “room and board,” victims’ restitution, and legally obligated financial support for inmates’ families. Specifically for PIECP, “deductions, in aggregate, cannot exceed 80 percent of gross wages.” 42 However, the remaining 20% may be directed to an “inmate worker’s expense accounts, savings accounts, or toward the settling of the worker’s legal obligations, including the payment of fines and restitution.”43 Therefore, the inmate may not actually receive much at all.
Deductions are taken from the gross earnings of inmate wages, so an inmate working on a PIECP project that pays the federal minimum wage (currently $7.25 per hour) may net only $1.45 per hour (20% of $7.25), and this is before any further deductions for fines or legal obligations. Inmates working on UNICOR projects for Federal Prison Industries (earning $0.23-$1.15 per hour) would net $0.04-$0.23 per hour before additional deductions. Inmates at state prisons earn wages spanning a wider spectrum, but most earn $0.25-$2.00 per hour (though some are unpaid), netting similar amount as at UNICOR.
40 E. Ann Carson, Ph.D., Elizabeth Anderson, Bureau of Justice Statistics. December 29, 2016 https://www.bjs.gov/index.cfm?ty=pbdetail&iid=5869 41 “FPI General Overview.” UNICOR. https://www.unicor.gov/FAQ_General.aspx#4/ 42 “PIECP Final Guidelines.” National Correctional Industries Association. http://www.nationalcia.org/piecp-2/piecp-final-guideline. 43 “PIECP Final Guidelines.” National Correctional Industries Association. http://www.nationalcia.org/piecp-2/piecp-final-guideline.
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Detailed Discussion of Prison Industries
Prison Labor in For-Profit Prisons
Some reports indicate that for-profit prisons found their start around 1825 in Kentucky when the local government leased its prisons to an entrepreneur in exchange for a set fee and half of his profits. Louisiana and Tennessee followed similar paths in the decades to follow.44 Other reports point to the construction of San Quentin State Prison in the 1850s as the first privately- owned prison since the state of California agreed to let a large contractor build and run the prison.45 Early accounts of prison privatization or convict-leasing were tumultuous for the states entering into contract with private contractors;46 however, the 1980s saw a resurgence of for- profit prisons. Now a flourishing industry, GEO Group and CoreCivic (formerly Corrections Corporation of America or CCA) are the two largest publicly-traded for-profit prisons in the United States. “Thanks to a series of mergers, GEO and CCA now control about 80 percent of the private prison and jail beds in the United States… Put another way, the for-profit prison industry constitutes the country’s fourth largest prison system. CCA is the fifth largest prison operator, just behind the federal Bureau of Prisons, California, Texas, and Florida.”47
As a socially responsible investment firm, NorthStar Asset Management, Inc. has never and will never invest in for-profit prisons such as GEO Group and CoreCivic. We find inmate labor in these prisons particularly concerning due to the risky nature of an entirely for profit enterprise being allowed to operate in its own interests rather than in the interests of our society. As Time Magazine described, “companies that build and run private prisons have a financial interest in the continued growth of mass incarceration.”48 As mentioned above, privately-run prison corporations were members of ALEC during the time it pushed for stronger sentencing, bail- bond regulation changes, and the expansion of the PIE program. All readers should be wary of the fact that corporations that benefit financially from legislation aimed toward increasing incarceration (i.e. more prisoners = more profit) have had influence in federal or state lawmaking related to incarceration. And all investors and all companies auditing supply chains must of course be aware of incidences of prison labor within publicly-traded prisons.
44 Rick Paulas. “America's Private-Prison Industry Has Always Been All Right.” Prison Legal News. May 31, 2017. www.prisonlegalnews.org/news/2017/may/31/americas-private-prison-industry-has-always-been- all-right/ 45 “Private Jails in the United States.” FindLaw. https://civilrights.findlaw.com/other-constitutional- rights/private-jails-in-the-united-states.html 46 Sharon Dolovich. “State Punishment and Private Prisons.” Duke Law Journal. Dec 2005. Vol 55, No. 3 (452-453) 47 Gottschalk, Marie. Caught, The Prison State and the Lockdown of American Politics. Princeton, New Jersey: Princeton University Press, 2015. (92) 48 Joseph Margulies. “This Is the Real Reason Private Prisons Should Be Outlawed.” Time. August 24, 2016. http://time.com/4461791/private-prisons-department-of-justice/
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Later in this paper, we offer recommendations for companies that find prison labor in their supply chains. Companies discovering that the prison labor is associated with for-profit prisons should proceed with heightened scrutiny and concern due to the higher risk of exploitation and abuse49 at for-profit prisons.
Prison Industry Enhancement Certification Program (PIECP)
As briefly referenced above, the Prison Industry Enhancement Certification Program (PIECP) is a federally legislated program that allows for interstate commerce of certain inmate-made goods. Most non-agricultural products made by inmates are prohibited from sale across state lines; however, PIECP allows for product sale and resale outside the state of manufacture.
As of this writing, only about 5,000 inmates are employed in PIECP industries throughout the state and federal prison systems. While this is a small percentage of the overall inmate worker population, PIECP is the most visible of all prison labor programs.
Not every state in the U.S. participates in PIECP, but states can have more than one active site (such as different prisons) as well as many active projects. For example, as of December 31, 2017, Utah had two active sites: the Utah Department of Corrections as well as the Utah County Sheriff’s Office,50 and those sites each had multiple active projects. For-profit prisons may participate as an active project if they qualify. It appears that the outside company partners of PIECP are most often small and medium size privately-owned companies which we believe may often serve as suppliers to larger companies, including publicly-traded and/or customer-facing companies.
As required by law, PIECP offers certain (limited) labor protections for prisoners such as the fact that inmates must volunteer to work (it must not be compulsory) and employers are required to pay a “prevailing wage” (wages a non-incarcerated worker would make for the same job in the same region). Minimal government-sponsored reviews and oversight also exist. As socially responsible investors, we note that the prevailing wage requirement was apparently designed specifically to avoid competition with free-world jobs, not to enable inmate workers a fair wage or ensure safe conditions.
Concerns about PIECP
The minimal labor standards for PIECP may appear encouraging – require a minimum wage, ensure that labor is voluntary, eliminate competition with local businesses – but our research uncovered numerous allegations indicating that some supplier companies have devised ways to circumvent the regulations that would have protected inmates’ best interests.
49 Timothy Williams. “Inside a Private Prison: Blood, Suicide and Poorly Paid Guards.” The New York Times. April 3, 2018. www.nytimes.com/2018/04/03/us/mississippi-private-prison-abuse.html 50 As per the Fourth Quarterly Statistical Report from NCIA: nationalcia.org
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For example, we found allegations that some companies have avoided paying the prevailing wage to all inmates involved in a project by delineating two groups of inmates: a group paid non-PIECP wages (below prevailing wage) to produce various pieces of a product and a second group of PIECP inmates who are paid prevailing wage for the final assembly. 51 This allows the supplier to cut wage expenses while still permitting the company technical compliance with PIECP regulations and thus the ability to sell the product across state lines. Similarly, inmates producing products would be required to receive prevailing wage, but inmates providing the service of shipping and handling the items can be paid the prison’s rate (far below prevailing wage, often less than $1.00 per hour).
In another example, a prison industry employs inmates as trainees for an extended period of time (thereby paying them lower than the otherwise required prevailing wage), but as they become ready to move up to a level that would necessitate payment of a prevailing wage, the prison industry transfers the inmates to a different job at the lower-wage trainee level.52
Additionally, we’ve read reports that new PIECP projects have sometimes attempted to circumvent the requirement to consult with local business organizations to verify that the PIECP project will not interfere with free-world employment. We have been told that, rather than initiate formal consultations with appropriate local groups (such as the local chamber of commerce), some PIECP ventures have sometimes simply advertised the new program in local newspapers before proceeding. Clearly, this may satisfy the letter of the law, but it is not consistent with the spirit. PIECP ventures are required to ensure “the avoidance of displacement of civilian workers in the locality,” but a leading prisoner activist in this field of research alleges instances wherein local businesses were pushed out by PIECP ventures which undercut them on bids due to lower overhead costs.53
Issues with Oversight and Organization
These aforementioned issues raise concern for us about oversight of PIECP, and we believe investors and companies should scrutinize practices in this program before supporting PIECP going forward. In particular, we are concerned about both the organization that oversees PIECP regulatory adherence and the actual processes in place to ensure that Bureau of Justice Assistance (BJA) regulations are followed. In 1995, the BJA outsourced oversight of PIECP to the National Correctional Industries Association (NCIA). NCIA’s members are administrators and
51 Bob Sloan. “PIECP, Prison Labor, Prison Industries Violations.” PIECP Program Violations Web Site. http://prison-labor.50megs.com/rich_text_1.html 52 Bob Sloan. “The Prison Industries Enhancement Certification Program: Why Everyone Should be Concerned.” Prison Legal News. March 15, 2010. https://www.prisonlegalnews.org/news/2010/mar/15/the-prison-industries-enhancement-certification- program-why-everyone-should-be-concerned/ 53 Bob Sloan. “INSOURCING - How your government does not protect your jobs - or prosecute PIECP Violations” Daily Kos. Dec 16, 2010. https://www.dailykos.com/stories/2010/12/16/929506/-
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employees of state prison industry programs and their PIECP private sector partners, vendors, and suppliers.54 We find this arrangement highly problematic. NCIA’s board of directors has historically been comprised almost exclusively of prison industry officials; thus, the NCIA oversight group includes the very PIECP participants that it is charged with monitoring. Given the exploitation risks and the profit-enhancing incentives to lower costs further, the fact that NCIA is charged with policing its own dues-paying membership creates a clear and concerning conflict of interest.
Our research has also revealed that the actual oversight procedures for PIECP may be lackluster. According to regulations, the BJA requires that PIECP partners undergo review for compliance with the mandatory requirements prior to starting any new industry program. Additionally, annual reviews should be conducted from then on to verify that wages are appropriately paid to inmate workers, deductions from those wages are used for the purposes permitted, benefits are being provided, and local unions and competing free-world businesses are being consulted. However, due to the fact that “grant funds have been significantly reduced in recent years,” on- site assessments have been dramatically reduced. The most recent reporting from NCIA indicates that in 2010 the organization performed 15 site assessments (assessing 38 active projects). While the report doesn’t disclose the total number of projects that were active at that time, a third party reported that about 200 projects were active during this period.55 Among the sites that were assessed, various violations and non-compliance issues were uncovered. The NCIA worked to rectify them, but our concern lies in the apparent infrequency of these assessments and the apparent failure to assess all project sites. With limited oversight on a regular basis, we have little confidence that inmate welfare is being properly safeguarded.
Furthermore, we are concerned by the employment structure of many projects. In many cases project oversight is located at the local prison system, although it has come to our attention that private sector partners can be responsible for their own oversight in some instances. In one particular model of employment, “a private company owns and operates a business inside prison, and has direct control over business operations. Inmates are employed by the company.”56 In this model, we see significant opportunities for mistreatment of inmates given the low level of oversight by the local correctional agency.
In all, PIECP does offer inmates limited benefits that they do not enjoy with non-PIECP prison jobs; however, investors and companies should perform rigorous due diligence to ensure that
54 NCIA 2018 Board. National Correctional Industries Association. Accessed March 15, 2018. http://www.nationalcia.org/wp-content/uploads/2018-Board-1.pdf 55 Bob Sloan. “INSOURCING - How your government does not protect your jobs - or prosecute PIECP Violations” Daily Kos. Dec 16, 2010. https://www.dailykos.com/stories/2010/12/16/929506/- 56 Barbara Auerbach. “The Prison Industries Enhancement Certification Program: A Program History.” National Correctional Industries Association. May 4, 2012. http://www.nationalcia.org/wp- content/uploads/PIECP-a-Program-History.pdf
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the PIECP private enterprise partners are adhering to the best practices we outline later in this paper.
Companies that use suppliers and service providers are encouraged to perform a quarterly review of NCIA’s disclosure documents, including the listing of its current private enterprise partners (NCIA’s Quarterly Statistical Reports.)57 Unfortunately, simply reviewing NCIA’s Quarterly Statistical Reports provides only minimal information about prison labor in the supply chain. Given that PIECP covers only about 5,000 working inmates, and because prison labor could appear anywhere downstream in the supply chain, PIECP reports are useful but very limited. In other words, if a publicly-traded company reviews its own suppliers and finds no crossover with the private companies listed on NCIA’s Quarterly Statistical Reports, it is still quite possible that inmates are providing labor for other suppliers in the company’s supply chain.
Federal and State Prisons Outside PIECP
State Prisons:
Nearly all states have “correctional industries” of some kind. Each state has its own regulations that dictate what people or entities can buy prisoner-made products. In many states, sale of inmate-made products is limited to state, federal, and local government agencies, nonprofit organizations such as state universities and religious organizations, and other state-funded agencies. In many states, certain agencies are required to buy a variety of products from the state correctional agency, even to the apparent detriment of at least one local business.58 While some correctional industries clearly acknowledge state laws prohibiting sale of prisoner-made goods outside these categories, it is unclear whether these restrictions apply to agricultural products and services. Further analysis of the actual laws in each state would be necessary to clarify the answer to this question.
Many states explicitly allow private enterprise partnerships or customers. In our state-by-state analysis, we have identified at least 22 prison labor programs (21 states plus the federal UNICOR program) that we believe explicitly allow prisoners to produce goods for private companies through the local correction industry outside PIECP. The details of those partnerships are, in general, not disclosed to the public. While the vast majority of correctional industries offer product catalogues on their websites, and some even offer publicly available annual reports, very few offer explicit connections to named private company customers or partners.
57 Access the Quarterly Statistical Reports on the NCIA website here: http://www.nationalcia.org/piecp- 2/quarterly-statistical-reports 58 Mike Wiser. “Iowa's Prison Industries & the open market.” The Gazette. March 17, 2014 http://www.thegazette.com/2014/03/17/iowas-prison-industries-the-open-market
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With 2.2 million (or more) inmates in the federal and state prison systems and no centralized department overseeing state prison labor, state prison industries offer the largest volume of inmates for product production while also offering very little oversight or disclosure on what inmates are making and whether these products enter the open market. It is nearly impossible to determine how many inmates in state prisons are producing products for resale by private sector companies.
Just as with PIECP, we have various concerns about state correctional industries. Some reports from ex-inmates indicate that certain prison facilities transport inmates to and from work for an hour or more each way, and they often subject inmates to inhumane work conditions.59 In many states, able-bodied inmates are required to work; in at least two states, correctional industry jobs are unpaid60; and, in some instances, inmates who refuse to work are punished by lengthened sentences or stints in solitary confinement.61 Many states publicly declare that they have very few private enterprise partners or customers, but some of the products made and sold raise questions about who the customers are or whether state laws are being obeyed. We are concerned that some of these correctional industries may be circumventing regulations in order to sell to private companies for greater profit. For example, one allegation we discovered noted that companies producing items by prison labor can get around the interstate commerce restriction by simply selling their products to another company that has a distribution center in their home state.62 After the sale to its distribution center within the state, the purchasing company can then proceed to move the product around the country.
Laws surrounding prison labor are complex, and it is this lack of clarity that necessitates action by companies sourcing products or services from suppliers. Only an audit of suppliers can uncover and clarify all the instances of prison labor in a company’s supply chain and determine whether those suppliers are following state and federal regulations properly. Companies that find prison labor in their supply chain should endeavor (at a bare minimum) to ensure that the work is paid and voluntary.
Federal Prisons:
In Federal prisons, all able-bodied inmates are required to work during their incarceration, either for prison benefit (such as cleaning, cooking, maintenance) or for private sector partners. Federal Prison Industries functions under the trade name “UNICOR.” Given that the federal PIE
59 Victoria Law. “Martori Farms: Abusive Conditions at a Key Wal-Mart Supplier.” TruthOut. June 24, 2011. www.truth-out.org/index.php?option=com_k2&view=item&id=1808:martori-farms-abusive-conditions- at-a-key-walmart-supplier 60 “State and federal prison wage policies and sourcing information.” Prison Policy Initiative. www.prisonpolicy.org/reports/wage_policies.html 61 Kanyakrit Vongkiatkajorn. “Inmates Are Kicking Off a Nationwide Prison Strike Today.” Mother Jones. September 6, 2016. www.motherjones.com/politics/2016/09/national-prison-strike-inmates/ 62 Sloan, Bob. Personal interview. 17 February 2017.
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program employs less than 100 inmates generally, the vast majority of inmates working for federal prison industries are working outside PIECP restrictions.
UNICOR inmates manufacture a wide variety of products, including apparel, awards, linens, and office furniture, and provide many services, including distribution, 3D modeling, and call centers. The majority of the products are sold to dozens of other federal and state agencies (such as other prisons, the postal service, the department of agriculture, and even the Smithsonian Institution), but we have seen reports of certain items being sold to private sector companies, such as solar panels produced for SolarCity.63 Alternatively, it is possible that products are sold to other government agencies and are then resold to private sector companies or even other national governments. Multiple news reports have indicated that prisoners have built military products such as anti-tank missile components, body armor, and land mine sweepers that are sold to defense contractors or foreign governments.64
63 Nichola Groom. “Prison labor helps U.S. solar company manufacture at home.” Reuters. June 10, 2015, https://www.reuters.com/article/solar-prison-suniva/insight-prison-labor-helps-u-s-solar-company- manufacture-at-home-idUSL1N0YP17Y20150610 64 Noah Shachtman. “Prisoners Help Build Patriot Missiles.” Wired. March 8, 2011. https://www.wired.com/2011/03/prisoners-help-build-patriot-missiles/
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Examples of Inmate-Made Products
The list of prisoner-made goods that we have uncovered is both staggering and very likely incomplete. Inmates in the U.S. are involved in sectors ranging from agriculture to defense contracting, from simple electrical wiring to solar panels. A partial list of goods and services we suspect (or have confirmed) have been made or provided by inmates and sold in the United States are:
• Vidalia onions from Georgia • Dental laboratory products • Watermelon from Arizona (using • Industrial materials, packaging, wiring, Colorado inmates) IT materials • Idaho potatoes • Lumber • Washington state apples • Tire re-treading and vehicle painting • Processed foods • Construction safety clothing • Furniture such as desks, office chairs, • Fences, park benches and tables, and dorm beds outdoor park signage and trash cans • Solar panels • Printing, mailing, and digital imaging • Clothing and footwear services • Eyeglass lenses • Latex balloons • Cleaning supplies • Call center services
Very few companies are explicit about their partnerships with prison industries, but our research has revealed several clear connections as well as many potential connections to major corporations and retail customers. We list some examples on the following pages and discuss strategies that companies and shareholders can pursue in order to find and assess prison labor in the supply chain.
PIECP Products and Private Enterprise Partners
To start, the National Corrections Industry Association (NCIA) has a publicly available listing of its Corporate Members.65 On the next page is a screenshot (Figure 1) of just the beginning of this long list. Although the relationships between these companies and the NCIA are not disclosed, we assume there is a mutually beneficial relationship between each company and prison labor. Some companies may benefit directly by hiring inmates to make products or provide services (or hiring subcontractors who do so), others may be providing supplies to prison labor industries for inmates to use to create products, and others on this list appear to be companies dedicated solely to providing products to prisons themselves (officer clothing and weapons, inmate bedding, inmate recreational materials, etc.). Another example is Correctional Technology Representatives, “a professional services organization dedicated to
65 “NCIA Corporate Members.” National Correctional Industries Association. http://www.nationalcia.org/resources/ncia-corporate-members
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providing clients a turnkey approach for introducing products into the correctional industries model to promote reduced recidivism through manufacturing of highly efficient technologies.”
Certain recognizable company names Figure 1. Screenshot of partial NCIA Member Listing (as of 3/15/18) appear on this list, including: 3M (manufacturer of a variety of consumer and industrial supplies), Dauphin (producer of office furniture), Avery Dennison (best known for its adhesive labels and packaging), Burlington Industries (owner of Burlington Coat Factory), and “JIFFY” Foodservice (which makes baking mixes such as corn bread or blueberry muffins). What we are unable to know from this listing without further disclosure by the companies is the nature of the relationship with prison industries. Are inmates making desk chairs for Dauphin to sell to retail customers? Is JIFFY Foodservice providing mixes to the prison for inmate consumption, or are inmates producing products that JIFFY is reselling? Are inmates producing coats or other products for sale in Burlington Coat Factory stores, or is there another reason Burlington is an NCIA member? It has been well-documented66 recently that 3M may be connected to products made by inmates in Chinese prisons, but anecdotal stories we’ve been told allege that 3M may also be connected to domestic prisons.
There are numerous companies whose relationships to prison labor are unclear, such as an industrial shredding company67; a company that creates various webbed textiles including shoelaces68 (and whose
66 “H&M, C&A, 3M investigate China prison labor report.” Reuters. Feb 21, 2018. https://www.reuters.com/article/us-china-prison/hm-ca-3m-investigate-china-prison-labor-report- idUSKCN1G51NF 67 Industrial Shredders: http://www.industrialshredders.com/ 68 Hickory Brands: https://hickorybrands.com/
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website advertises a connection to athletic shoe company New Balance); a furniture company69 that appears to sell trendy items that probably wouldn’t show up in a prison itself (raising questions as to who is buying these products and the exact nature of the prison industry relationship); and a variety of fabrics wholesalers that are most likely providing materials to prison industries for product manufacture.
We also note that several eyeglasses retailers are listed as members, and those retailers’ websites indicate that they sell major name brand eyeglasses. Given that correctional industry websites often advertise inmate labor for eyeglass lenses, it is possible that inmates are making lenses that are being sold to these eyeglass retailers who are then selling completed glasses to customers. However, without more disclosure and explanation, shareholders and customers cannot discern whether these eyeglass retailers are connected to NCIA for the purposes of providing eyeglasses to inmates or whether they are outsourcing the creation of lenses to prison industries, thereby connecting these high-end eyeglass frames to inmate-made lenses. We do know that PRIDE Enterprises, the Florida prison industry system, manufactures eyeglasses through PIECP; and we know that in several other states prison industries manufacture eyeglasses or lenses, although those products should theoretically remain in the state as they are made outside PIECP.
Moving away from the NCIA membership listing, through our research we also identified several other connections between known product or component manufacturers and suppliers that appear to sell to major brand names. For example, inmates in Arkansas manufacture cable assemblies and wiring harnesses for SemahTronix70, a supplier that uses inmate labor through PIECP and advertises on its website that it sells to GE and Philips as well as to a several other electronics manufacturers.
As noted earlier in this paper, corporations that buy products from suppliers can search for these connections in order to identify prison labor in the supply chain. NCIA publishes several quarterly statistical reports71, including a quarterly Certification and Cost Accounting Center Listing. The companies on these listings are generally small to mid-size suppliers and can include everything from actual product manufacturing to manufacturing the packaging materials or a component for a product. However, we must remember that these statistical reports only cover a small fraction of inmates and arguably do not cover the most vulnerable inmates given that there is a minimal level of uniform oversight for PIECP private company partnerships.
Generic Products in the State Prison Industries
State prison industries outside PIECP are much more difficult to trace through the supply chain. By examining state prison industry websites and annual reports, we have been able to document a variety of types of products made by inmates and a few brand name linkages, but connecting those products
69 AC Furniture: https://acfurniture.com/showcase.php 70 SemahTronix: https://www.semahtronix.com/ 71 Access the Quarterly Statistical Reports on the NCIA website here: http://www.nationalcia.org/piecp- 2/quarterly-statistical-reports
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with brand names en masse is the most significant challenge. While many of the products manufactured in prisons are clearly geared toward sale to other prisons and state-funded agencies like parks and recreations departments (benches, grills, and other outdoor products) and state universities (dorm and classroom furniture), there are many products that do not appear to be marketed toward nonprofits or state agencies. Only a complete audit of suppliers from raw ingredient sourcing to customer hands will allow us to know how many of these prisoner-made products are actually in the supply chain. The list of non-agricultural products and services inmates produce outside PIECP is too extensive to be contained within this paper, but several examples are listed below:
• Colorado participates in a variety of services and create various products that appear to be marketed to private customers, including televisions, motorcycles, sheep housing, cow and goat husbandry and dairy products, produce farming, fish farming and processing, honey production, lobster farming, orchard fruits, partridge hatching and pheasant farming, ranching, ultra-high pasteurization, vineyard cultivation, canoes, water buffalo dairy and processing, and white bison housing.
• Kentucky Correctional Industries manufactures many items that may potentially enter the open market under generic branding, such as: janitorial supplies, dorm furniture, classroom furniture, metal lockers, office desks, desk chairs, lounge seating, wooden outdoor chairs (adirondack chairs and picnic tables), garment printing, reclaimed wood for flooring/walls/furniture, braille services, print shop, and even coupon printing.
• Maine Department of Corrections Industries sells inmate-made bird feeders and houses, wooden kids’ furniture and toys, wooden kitchen items (cutting boards, napkin holders, towel holders, candy dishes), games, ship models, a variety of wooden house furniture, jewelry boxes, leather goods, paintings, lamps, clocks, and wood carvings.
Agriculture and Recent Political Changes
While prison labor has been an aspect of the U.S. penal system for hundreds of years, recent political events have made it clear that agriculture relies on prison labor. Recent “immigration reform” efforts have precipitated a shortage of available labor for physically demanding jobs such as harvesting crops. Farmers have reported an inability to hire enough local willing laborers, and migrant workers have faced obstacles entering the U.S. safely due to an increasingly unfriendly political atmosphere. 72 This labor shortage caused losses of hundreds of millions of dollars in crops that rotted in the fields. 73 In response to this reduction in numbers of willing civilians for “backbreaking” labor in crop harvesting, several state
72 Chad Mills. “Some migrant workers could vanish with new Ga. immigration law.” May 28, 2011 WRDW. http://www.wrdw.com/home/headlines/122785519.html 73 Benjamin Powell. “The Law Of Unintended Consequences: Georgia's Immigration Law Backfires.” Forbes. May 17, 2012. https://www.forbes.com/sites/realspin/2012/05/17/the-law-of-unintended-consequences-georgias- immigration-law-backfires/#7b98f73b492a
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governments have turned to prisons to provide a workforce to the agricultural sector.74,75 Because of the agricultural products exemption and now with labor shortages, the agricultural segment is particularly rife with incidents of prison labor. Below, we list just a few examples:
• Martori Farms, a producer of fresh produce in the southwestern U.S., is widely reported as a long-time major supplier to Wal-Mart.76 Given that agricultural products are exempt from the Ashurst–Sumners Act, we can assume that these products are being sold to customers outside the state in which they were produced. We have also found references by Martori Farms itself indicating that the company’s Kandy Melons have been sold in Costco Wholesale’s stores.
• Colorado Correctional Industries farms tilapia and produces goat milk for suppliers that sold to Whole Foods until late 2015.77 Records from 2015 do not indicate that tilapia was produced under the PIE program, and given that Whole Foods resells its products to customers (and likely out of state), we can extrapolate that fish are categorized as agricultural goods as well.
• Louisiana Prison Enterprises raises cattle and flight birds at various state prisons as well as a variety of crops at the Louisiana State Penitentiary (commonly referred to as Angola). While the Prison Enterprises website states that only tax-supported and non-profit agencies are qualified to purchase from Prison Enterprises, these products are sold on the open market. While it is not stated clearly, we assume these items are considered agricultural products and therefore exempt from interstate commerce restrictions of the Ashurst–Sumners Act of 1935.
74 Keegan Hamilton Thu. “Hard Labor: Prison Inmates Are Picking Washington Apples.” Seattle News. Nov 3, 2011. http://archive.seattleweekly.com/home/934163-129/laboremployment 75 Nicole Hill. “US farmers using prison labor.” The Christian Science Monitor. August 22, 2007. www.csmonitor.com/2007/0822/p14s02-wmgn.html 76 Al Norman. “‘I Ain’t Gonna Work On Martori’s Farm No More’” Huffington Post. June 29, 2011. https://www.huffingtonpost.com/al-norman/i-aint-gonna-work-on-mart_b_886596.html 77 Allison Aubrey. “Whole Foods Says It Will Stop Selling Foods Made With Prison Labor.” NPR The Salt. September 30, 2015. https://www.npr.org/sections/thesalt/2015/09/30/444797169/whole-foods-says-it-will-stop-selling- foods-made-by-prisoners
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Recommendations for Corporations that Use Suppliers: Policy & Auditing
We believe that all corporations that source products or services from suppliers should enact three phases of “best practices” related to prison labor in the supply chain:
First, companies should adopt a Prison Labor Policy stating that the company will: • Routinely and thoroughly audit all suppliers and service providers in the company’s supply chain to identify and track incidences of prison labor; • Engage all suppliers and service providers in the supply chain to identify the conditions of inmate laborers such as wages paid, actual wages enjoyed, post-release support programs (such as job matching), and health and safety of workers in the programs; • Insist on certain minimum requirements such as payment of minimum wage, voluntary status of labor, assurances against free-world business displacement, and creation of programs which would match near-parole inmates with jobs that match their skills gained in the prison labor program.
Second, the sourcing company should perform an audit of all supplier companies in the supply chain, from the highest level supplier down to raw ingredients production. We recommend that corporations use NCIA’s quarterly Certification Listing Reports as a starting point, but this audit will likely take the form of surveying all suppliers to identify the source(s) of labor. Any identification of prison labor, no matter how minor, should be pursued further (see below).
Third, after identifying instances of prison labor in the company’s supply chain, it is the responsibility of the company to both identify the status of various risks at each prison labor program and to insist upon a variety of changes in each prison labor program. In engaging with suppliers, we recommend that companies: a) first request information related to all issue areas and preferred practices listed below in order to determine levels of adherence; and b) insist upon changes that would bring suppliers into adherence with the preferred practices below.
Preferred Practices:
For non-PIECP programs (Federal and State):
1. Require “prevailing wage” – a wage similar to that paid to a non-incarcerated employee in the same field in the same region of the United States. Federal or state minimum wage (whichever is higher) should be a bare minimum. All inmates working on production/manufacture/harvesting at all points during the process, including those producing agricultural products, should be paid prevailing wage. Ensure that no inmates are uncompensated, regardless of what point in the process the inmate participated in the production/service. Require periodic verification of wages paid to inmates; require a format which allows verification that prevailing wage was paid.
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2. Require that the supplier provides a job-matching program for inmates upon release. 3. Ensure that inmates have access to training programs in their prison to assist the inmates in understanding logistics such as job applications, résumé writing, interview skills, and navigating social mores of being an ex-convict attempting to re-enter the workforce. 4. Require that labor is voluntary; insist that only inmates who volunteer for the labor program work on the company’s product or service; and require documentation of this fact. 5. Require third-party oversight of the project to ensure the health and safety of inmates. 6. Request explicit documentation illustrating dialogue with local businesses to ensure the prison industry will not displace local business. 7. Require explicit documentation that the prison industry followed appropriate protocol to identify the prevailing wage that should be paid to inmates. 8. Request verification that the company has not sought or found loopholes allowing it to sell across state lines (outside of PIECP). 9. Require written documentation of the supplier’s process for ensuring that intermediary buyers will not resell products across state lines and that those buyers are not distribution centers that intend to sell across state lines. 10. Require regular verification in writing that these minimum standards have been met and continue to be upheld.
For PIECP:
1. Require that suppliers use the “customer” or “manpower” models of PIECP, ensuring that the private sector partner (the supplier) is subject to oversight by a Cost Accounting Center (CAC) staffed by local prison administrative officials.78 2. Require documentation that the PIECP industry was initially certified and has been continually renewed since inception, including both the original certification and any recertification if the industry program changed significantly after inception. 3. Request and retain photocopies of those review documents and inquire as to whether the supplier has at any time been in violation of any PIECP regulations.
78 For PIECP, the BJA identifies “certificate holders,” and those certificate holders then designate “Cost Accounting Centers” (CACs) – the business partners in PIECP projects. There are 2-3 employment models depending upon the state or program:
1. Customer model: “the private sector business is engaged in a CAC enterprise only to the extent that it purchases all or a significant portion of the output of a prison-based business owned and operated by a governmental entity” ; 2. Manpower model: “the private sector business will pay a pre-determined fee covering labor, overhead, and profit to the prison industry”; and 3. Employer model: “the private sector business owns and operates the CAC by controlling the hiring, firing, training, supervision, and payment of the inmate work force.”
This last model concerns us: in the employer model, “the correctional agency assumes no major role in industry operations, does not direct production, and exercises minimum control over inmate labor performance.” In the “employer model,” we see significant opportunities for mistreatment of inmates given the low level of oversight by the local correctional agency. We can assume that the customer and manpower models offer a heightened level of oversight given that prison officials are in charge of most or all details of inmate pay, treatment, and reporting.
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4. Request explicit documentation illustrating dialogue with local businesses to ensure the prison industry will not displace local business. 5. Require written documentation that each part of the PIECP project from inception to final market sale is completed by PIECP inmates. If any inmates related to the project are outside PIECP, require information on those non-PIECP inmates (such as wages paid, volunteer status, weekly hours worked during the project timeframe, etc.). Also seek explanation as to why only certain portions of the project are completed by PIECP inmates. 6. Require documentation that all inmates that work on the sourcing company’s product/service are paid prevailing wage. 7. Request written documentation on the following: • What percent of wages does the local prison deduct from inmate wages for room and board? • On average, what percentage of wages does the inmate receive in his or her commissary account after deductions? Note: This response may differ from the response to the above question. 8. Require documentation that local competing businesses (in addition to the local Chamber of Commerce) were consulted before initiating the PIECP project. 9. Require that the supplier fund a pre- and post-release assistance program related to job acquisition after release, interviewing skills, and managing job applications as an ex-convict.
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Conclusion: Moving Forward
All companies that purchase products or services from suppliers have influence over those suppliers. Just as we, as investment advisors, refuse to put certain companies or industries in our clients’ portfolios, companies can adopt a zero tolerance stance for inappropriate treatment of inmates working in correctional industries. If supplier companies continue to participate in the use of prison labor, all companies should adopt a Prison Labor Policy and persistently pursue an accurate audit of the status of prison labor within the company’s supply chain, as well as a documented, clear depiction of the conditions in those labor programs. Corporations with prison labor in their supply chain must establish standards which will enhance working conditions, provide job training and placement, and improve compensation for workers.
It is crucial that companies accept responsibility for easing the burden that prison labor has engendered. By denying inmates fair wages and basic employee rights, we are continuing to deepen the economic inequality that was embedded in slavery. Prison labor takes advantage of a captive workforce that has no ability to speak out against unfair conditions, and it robs inmates’ families of supportive wages:
Depriving prisoners of these basic rights . . . in turn deprives their victims of potential restitution and the economy at large of additional drivers of economic production. More specifically, the families of offenders miss out on financial support, especially if the household’s sole breadwinner is the one incarcerated. There are more children of inmates than there are inmates in American prisons, many of whom wind up relying on public assistance. Prisoners’ wages, if higher, could be garnished to support these families. At $2 a day, it’s difficult to imagine a family getting any kind of support. It’s also difficult to conceive of victims receiving any kind of meaningful compensation from this sort of work scheme.79
Company involvement in improving conditions and wages at prison labor sites will likely benefit the company itself as well as our economy as a whole. Actively involved companies gain the opportunity to avoid negative publicity and potential litigation by intervening in exploitative prison labor programs before a public outcry tarnishes the company’s reputation and brand name. After a 1999-2000 study involving five leading U.S. economists, labor economist Tom Petersik argued that “virtually every stakeholder in the U.S. economy would be better off if people who were incarcerated were fully integrated into the U.S. labor force.” 80,81
79 Josh Kovensky. “It's Time to Pay Prisoners the Minimum Wage.” The New Republic. August 15, 2014 https://newrepublic.com/article/119083/prison-labor-equal-rights-wages-incarcerated-help-economy 80 Josh Kovensky. “It's Time to Pay Prisoners the Minimum Wage.” The New Republic. August 15, 2014 https://newrepublic.com/article/119083/prison-labor-equal-rights-wages-incarcerated-help-economy 81 Tom Petersik. “The Economics of Inmate Labor Force Participation.” September 2000. http://correction.org/wp- content/uploads/2014/10/mateworkforceparticipation.pdf
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Ideally, we believe that inmate workers should have the full rights and responsibilities of “free- world” employees, including the rights of prevailing wage and unionizing, as well as the responsibility of paying taxes and supporting their families. Given that many of these requests – mandated minimum wage, ability to unionize, worker’s comp – would require legislative changes that are unlikely to occur in the near future, it is the responsibility and opportunity of the company that sources from suppliers to use its influence as a buyer to protect both the inmates and company value.
Arguments for or against prison labor typically fall into one of two categories:
1. Companies and prison officials claiming lower recidivism and better inmate behavior during incarceration; or 2. Vocal activists comparing prison labor to slave labor, calling for the immediate abolishment of convict labor programs.
We cannot deny the aspects of prison labor that resemble modern slavery, but, barring regulatory changes that would overhaul the entire system, it is clear to us that proactive corporate engagement in reforming correctional industries (at a bare minimum) would be beneficial to inmates involved in these industries.
Due to the fact that companies have influence over their suppliers, identification of instances of prison labor in the supply chain should result in a qualitative evaluation process (as described on page 32) to document, audit, examine, and improve each prison industry project identified. Severing of the supplier relationship may be necessary; however, corporations using suppliers that hire inmate labor have the responsibility to use their influence to improve working conditions of inmates, provide job training and placement, and improve compensation for inmates employed in prison industries.
We move forward in this work by actively engaging the companies in our clients’ portfolios on this issue. Though we cannot undo the history of racism that has brought us to this place in history, we believe that investors and corporations must take an assertive stance in identifying and holding companies accountable for their participation in the slave labor of our time. We refuse to accept excuses, trivialization, or dismissal by those who tolerate and perpetuate the exploitation of incarcerated humans in order to slash costs and reap higher profits, and we believe that good corporate citizens will ask hard questions of their suppliers and insist on better conditions for any inmates who work in the supply chain.
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Appendix A: Shareholder Proposal Example (Costco 2018)
Supply Chain Policy on Prison Labor
WHEREAS: Financial and operational risks related to the sale of goods produced with prison labor, such as reputational damage, litigation, and supply chain disruption, can adversely affect shareholder value;
Our company’s Supplier Code of Conduct prohibits illegal prison labor: “The use of prison or convict labor must be consistent with laws where the merchandise is manufactured, and with the laws where it is imported”;
Prison labor is legally permissible in the United States and other countries where Costco goods are sourced. Inmates make numerous consumer products on behalf of companies, such as produce, office chairs, clothing, and packaging materials. Companies enjoy low overhead costs and potentially other benefits such as tax breaks;
Watchdogs assert that prison labor is often deployed in an inhumane manner that fails to balance cost savings to companies against treatment of prisoners;
Although slavery and involuntary servitude were abolished by the 13th Amendment, an exception was made for “punishment for crime.” Although some U.S. prisoners may receive wages ranging from $0.23 to $1.15 per hour, in the U.S. and worldwide many inmates are forced to work for no pay at all, and in unsafe or unhealthy conditions;
The use of prison labor in supply chains can undermine a retailer's reputation. In 2015, Whole Foods experienced significant backlash when customers learned that prisoner-made products were sold in stores;
Although the Company’s supplier code of conduct leads to occasional audits of suppliers for certain potential issues, it lacks sufficient attention to the use of prison labor. Careful review of our supply chain for prison labor could help Costco ensure that risk to its reputation and shareholder value is minimized by demonstrating effective company oversight.
RESOLVED: Shareholders of Costco urge the Board of Directors to adopt a policy committing the Company to: a) Survey all suppliers to identify sources of prison labor in the Company’s supply chain; b) Develop and apply additional criteria or guidelines for suppliers regarding the use of prison labor; and c) Report to shareholders no later than June 30, 2018, at reasonable cost and omitting proprietary information, on Costco’s progress in implementing the policy.
SUPPORTING STATEMENT: The Proponent recommends that the company’s progress report include: • Summary of results of the supplier survey, including actual and/or potential sources of prison labor identified, and in particular any use of: a) Suppliers who employ prison labor with compulsory, uncompensated, or severely undercompensated work programs, b) Suppliers who employ prison labor from privately-run prisons; • Summary of new criteria and guidelines for the use of prison labor; • Methodologies to be used to track, audit, and measure supplier performance; • Nature and extent of consultation with relevant stakeholders in connection with the policy development and implementation.
Examples of topics for possible guidelines or criteria could include: consideration of a minimum wage and/or overtime pay for inmate laborers, safety/health conditions, supplier-provided job-matching programs for inmates upon release.
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Appendix B: Glossary of Terms
Term Explanation The 1935 Federal act that made it illegal to knowingly transport Ashurst–Sumners Act convict-made goods for interstate commerce beyond certain exceptions
The “business-backed conservative group” which drafts model ALEC: American legislation for congress and, specific to the purposes of this paper, has Legislative Exchange been instrumental in increasing incarceration rates in the U.S. as well as Council expanding prison industry opportunities.
BJA: Bureau of BJA is part of the U.S. Department of Justice which oversees (among Justice Assistance other things) PIECP
One of the two largest for-profit prison companies. Previously known CCA: CoreCivic as CCA or Corrections Corporation of America, this company recently re-branded as CoreCivic.
The Fair Labor Standards Act (FLSA) establishes minimum wage, FLSA: Fair Labor overtime pay, recordkeeping, and child labor standards affecting full- Standards Act time and part-time workers in the private sector and in Federal, State, and local governments (www.dol.gov)
Justice System The 1979 Federal act that created PIECP and allowed for more Improvement Act exemptions to interstate commerce restrictions on inmate-made goods
NCIA: National Correctional The nonprofit organization of correctional industry professionals which Industries (among other things) oversees PIECP, as directed by BJA Association
A federally-legislated prison labor program created by the Justice PIECP: Prison System Improvement Act of 1979 which allows for the interstate Industry commerce of certain inmate-made goods. Approximately 5,000 Enhancement inmates work in jobs across state, federal, and private prisons that are Certification Program regulated by this system. In our paper, this is sometimes referred to simply as "PIE" or the "PIE program."
The entire network of companies that are interrelated in the production of a product or completion of a service. This includes Supply chain sourcing of raw materials all the way up to the final product that is sold to consumers or other companies.
UNICOR is the trade name for the federal prison system's correctional UNICOR/Federal industries. UNICOR is sometimes referred to as FPI (Federal Prison Prison Industries Industries), but generally goes by its trade name UNICOR.
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About NorthStar and the Authors
NorthStar is a wealth management firm based in Boston, Massachusetts USA. Since its inception, NorthStar has focused exclusively on socially responsible investing (SRI). NorthStar’s mission is to provide integrative and effective portfolio management by connecting social concerns to stock selection, asset allocation, and activism. To that end, NorthStar uses targeted shareholder activism to encourage social change.
Authors:
Julie Goodridge Chief Executive Officer
Mari Schwartzer Director of Shareholder Activism and Engagement [email protected]
Christine Jantz, CFA Chief Investment Officer
Leslie Christian, CFA Senior Investment Advisor
www.northstarasset.com
"Where creative shareholder engagement is a positive force for change."TM
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